Algorithmic trading (AT) in asset markets has risen in importance over the past decade, revolutionizing the way market transactions are conducted. The extant empirical literature provides sometimes contradictory results on the impact of AT on market quality parameters such as liquidity and volatility. In this work we create a computer simulated asset market in order to make the effects of algor...

In this paper, we employ simulation-based methods to study the role of a market maker in improving price discovery in a prediction market. In our model, traders receive a lagged signal of a ground truth, which is based on real price data from prediction markets on NBA games in the 2014–2015 season. We employ empirical game-theoretic analysis to identify equilibria under different settings of ma...

Recently, ontologies have been developed in various business domains with the recent maturing of the Semantic Web technologies. However, ontology-related researches have largely focused on the facilitation of successful matchmaking but not much on traders’ requirement elicitation and potential negotiations in e-marketplaces. Because ontology provides the key knowledge about the inter-relationsh...

In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders’ investment attitudes [1], and formulate the traders’ decision-making regarding investment as the maximum entropy principle for nonextensive entropy. We demonstrate that the equili...

This paper examines the effects of introducing and removing short sale constraints and margin requirements on a stock market using a multiagent simulation model. We focused on the influence of these kinds of restrictions on daily price volatility and on traders long-run wealth distribution. We performed analysis both in a closed market and in an open market, where there is random cash inflow or...

Behavioral economists have recently put forth a theoretical explanation for the equity premium puzzle based on combining myopia and loss aversion. Complementing the behavioral theory is evidence from laboratory experiments, which provide strong empirical support consistent with myopic loss aversion (MLA). Yet, whether, and to what extent, such preferences underlie behaviors of traders in their ...

Abstract I introduce parameterised response zero intelligence (PRZI), a new form of (ZI) trader intended for use in simulation studies the dynamics continuous double auction markets. Like Gode and Sunder’s classic ZIC trader, PRZI generates quote prices from random distribution over some specified domain discretely valued allowable prices. Unlike ZIC, which uses uniform to generate prices, prob...

Consider an exchange economy with n traders and k goods. Suppose that there exists C mappings p(·) and x (·) that specify for each initial endowment w of the k goods to the n traders a price vector p(w) and a vector of net trades x(w) that define a competitive equilibrium. Three systems of determinant equations are derived that the derivatives of p(·) and x(·) necessarily satisfy regardless of ...